12/06/02: Market Monitor -Frank Cochrane, President of Investment Timing Consultants
PAUL KANGAS: My guest Market Monitor this week is Frank Cochrane, President of Investment Timing Consultants, an investment advisory firm based in Farmington Hills, Michigan.
And welcome back to NIGHTLY BUSINESS REPORT, Frank.
FRANK COCHRANE, PRESIDENT, INVESTMENT TIMING CONSULTANTS: It's great to be here, Paul. Thank you very much.
KANGAS: On your last visit with us, May 10 of this year, with the Dow around the 10,000 level, you shocked many of our viewers by predicting it would fall as low as 5,500 during the following six months. And it got almost halfway down that level, 7,100, in early October. Has the eight week rally we witnessed recently softened your bearish stance?
COCHRANE: Short-term, Paul, I'm bullish. I think we could have a rally going into mid-January. However, longer term, I think what this eight week rally has done is basically delayed the inevitable. I think next year, the next six, 12 months or so, the market will work lower. We'll go below the levels that we were in early October.
KANGAS: Why so bearish still?
COCHRANE: Valuation I think is the key. The Fed has basically done everything they can do. They can lower rates a bit more, but the market is still very expensive. We had a huge bubble and build up in this market in the mid to late '90s. I think a correcting process has to occur, will occur. This may take several more years. We may do a lot of churning activity. But the volatility is going to be there. We're going to see some huge up moves and some huge down moves. But I think a person has to be very proactive, very nimble and very dedicated to managing their portfolio in a manner that they just keep on watching everything every single day. The days of buy and hold, I think, are gone for a long, long time.
KANGAS: So you see us in a secular or long-term bear market, but it could be punctuated by some cyclical or very handsome bull markets in the short-term?
COCHRANE: Absolutely. We've seen some great gains here. For example, Intel (INTC) from $12 to $20.
KANGAS: Right.
COCHRANE: IBM (IBM) from the low $50s up to almost $90.
KANGAS: And do you think this rally that we've seen recently still has legs?
COCHRANE: Yes, do I. I think that the market will rally, as we saw today, based upon the news of the day.
KANGAS: Yes, it did well.
COCHRANE: And should some year end 401K money, that type of thing, going into the market, and a Santa Claus rally, that effect, I think, should last until mid-January. But then I would be real, real cautious.
KANGAS: OK. Now, the last time you were with us in May, you said hold onto some previous recommendations you made, which were way up, Northrop (NOC), United Technologies (UTX). And they still are doing well. Johnson & Johnson (JNJ) hasn't done anything. Are you still with any of those?
COCHRANE: I would hold onto them here certainly, especially given the geopolitical situation.
KANGAS: You liked the golds, Newmont Mining (NEM), Barrick <Company: Barrick Gold Corporation; Ticker: ABX; URL: barrick.com; and Gold Fields (GFI), and they all had big run-ups after you were here in May. But now they're back even a little below where they were. You still like them?
COCHRANE: I think gold stocks will do extremely well next year. Most commodities will do well next year. So I would --
KANGAS: And you recommended actually shorting the Qs, which turned out to be profitable, and IBM when it was $82, it went down to $55, profitable. Dell Computer (DELL), though, has hung in there pretty good. What about those three?
COCHRANE: It's done real well and I think that stock will basically hold its own, although I wouldn't buy it here.
KANGAS: OK.
COCHRANE: Again, what I would do with those types of stocks is trade them. Look at the high range, look at the low range and trade on that basis.
KANGAS: OK. Any new recommendations here? What kind of strategy?
COCHRANE: I would continue, I would look at oil stocks, stocks in the XOI. I would look at shorting IBM in the high $80s.
KANGAS: Still again? OK.
COCHRANE: Buy back the low $50s, low $60s. Intel -- the ETFs, I would look at shorting those and buying those. This is a market to be traded.
KANGAS: OK.
COCHRANE: Those people that do that will be rewarded.
KANGAS: Do you or any of your personal interests have positions in these recommendations you're making?
COCHRANE: Not at all.
KANGAS: None of them?
COCHRANE: No.
KANGAS: OK. So in other words, you're still, you're still looking for a 5,500 Dow eventually?
COCHRANE: I think eventually. It may take a year --
KANGAS: What about NASDAQ? 800? That's what you said last time.
COCHRANE: Yes. I think NASDAQ 800 and I think somewhere in the 500 to 600 range on the S&P.
KANGAS: OK.
COCHRANE: Eventually. Again, and trade this market. Be very, very nimble.
KANGAS: Be nimble. Jack be nimble, Jack be quick.
COCHRANE: Exactly, Paul.
KANGAS: All right, Frank, thanks very much.
Thank you.
KANGAS: My guest Market Monitor, Frank Cochrane, President of Investment Timing Consultants.
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